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Post-LIBOR Settle Update: Adjusting To Adaptive Fed

US EURODLR FUTURES
BulletMarketsFixed Income

Lead quarterly EDM2 trading -0.020 at 98.155 after latest 3M LIBOR set'
rebounds +0.0342 to new 2Y high of 1.44371% (+0.04185/wk).

  • Balance of Whites (EDU2-EDH3) trade -0.070-0.075, back near midweek lows, readjusting (again) after Fed Chair Powell said he's prepared to consider larger than 50bp hikes late Thu (after downplaying 75bp moves at his press conference last week), as the committee adapts to "incoming data and the evolving outlook".
  • Meanwhile, Reds through Golds (EDM3-EDH7) trade -0.060-085 lower. Inversion in front Reds (mkt measure of confidence in Fed managing a soft landing/avoiding recession) expands: Red Sep (EDU3) currently trading 96.785 vs. Red Jun (EDM3) at 96.71. Levels start to flatten out (dis-invert) around Blue Sep'25-Dec'25 trading 97.07-.05.
  • Thursday's FI option trade recap: FI option trade remained mixed though upside call and call spread buying lead volumes as underlying Eurodollar and Tsy futures unwound Wed's multiple rate hike pricing. Notably, yld curves recovered from early flattening to steeper (2s10s +2.024 at 29.763 vs. 22.474 low).
  • Highlight trade included large buying over 80,000 August 97.81 calls from 5.5-6.0 (50k blocked overnight) that fits in well if your expectations are for less hikes in the second half of the year. Of the various put trades, a notable conditional curve spread faded the late curve move: block buy of 6,000 short Aug 96.50/Green Aug 96.75 put spds, 1.0 net debit for the conditional bear flattener.
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Lead quarterly EDM2 trading -0.020 at 98.155 after latest 3M LIBOR set'
rebounds +0.0342 to new 2Y high of 1.44371% (+0.04185/wk).

  • Balance of Whites (EDU2-EDH3) trade -0.070-0.075, back near midweek lows, readjusting (again) after Fed Chair Powell said he's prepared to consider larger than 50bp hikes late Thu (after downplaying 75bp moves at his press conference last week), as the committee adapts to "incoming data and the evolving outlook".
  • Meanwhile, Reds through Golds (EDM3-EDH7) trade -0.060-085 lower. Inversion in front Reds (mkt measure of confidence in Fed managing a soft landing/avoiding recession) expands: Red Sep (EDU3) currently trading 96.785 vs. Red Jun (EDM3) at 96.71. Levels start to flatten out (dis-invert) around Blue Sep'25-Dec'25 trading 97.07-.05.
  • Thursday's FI option trade recap: FI option trade remained mixed though upside call and call spread buying lead volumes as underlying Eurodollar and Tsy futures unwound Wed's multiple rate hike pricing. Notably, yld curves recovered from early flattening to steeper (2s10s +2.024 at 29.763 vs. 22.474 low).
  • Highlight trade included large buying over 80,000 August 97.81 calls from 5.5-6.0 (50k blocked overnight) that fits in well if your expectations are for less hikes in the second half of the year. Of the various put trades, a notable conditional curve spread faded the late curve move: block buy of 6,000 short Aug 96.50/Green Aug 96.75 put spds, 1.0 net debit for the conditional bear flattener.